COVID-19 Rent Relief: what can you ask from your landlord? (Pt 3)

WHAT YOU NEED TO KNOW

6 MAY 2020

Following our most recent post on this topic, the Victorian Government has now passed regulations to provide more clarity on the operation of the proposed COVID-19 rent relief provisions for commercial tenants (Regulations).[1]

The Regulations are the most detailed among those passed to date by States and Territories in response to the National Cabinet Mandatory Code of Conduct (Code).

There are some apparent wins and losses for both landlords and tenants respectively. In other respects, they leave a few questions unanswered and introduce new, unexpected, issues and departures from the Code.

In any event, small and medium businesses in Victoria (i.e. with turnovers less than $50M) (SME), among other businesses, now have a structured (albeit complex) legislative framework within which to negotiate rent relief from their landlords.

Here is a very brief snapshot of some of the main features of the Regulations:

• Application in Writing: to receive rent relief, a tenant must make a written request to the landlord that complies with the relevant provisions of the Regulations (this includes evidence that the tenant is an SME that qualifies for, and participates in, the JobKeeper scheme).
   
• Landlord’s Offer: following receipt of a request for rent relief that complies with the Regulations, a landlord must offer rent relief to the tenant within 14 days after receiving that request (or such other timeframe as may be agreed).
   
• Reduction in Turnover: the amount of rent relief that an SME tenant can receive does not need to be directly related to the reduction in the SME tenant’s turnover. For example, an SME tenant is not limited to receiving relief in proportion to the reduction in turnover claimed for the JobKeeper scheme. It is open to a landlord and SME tenant to agree on a different percentage reduction.
   
• Waiver / Deferral: at least 50% of the rent relief offered must be in the form of a waiver unless otherwise agreed.
   
• Broader circumstances: both the landlord’s and tenant’s respective positions must be taken into account in formulating any rent relief offer. In other words, rent relief packages are to be constructed on a case by case basis relative to the particular circumstances of the lease and the parties.
   
• Extension of Term: if there is an agreement to defer rent, the landlord must offer to extend the term of the lease by a period corresponding with the deferred payment period.

There are many other considerations and issues in the Regulations that mean landlords and tenants will need to work co-operatively to reach agreement on an appropriate rent relief package.

It is not a one size fits all model – which can have both positive and negative consequences. Positive - in the sense that any agreement should suit the particular circumstances. Negative - in that it might take time and negotiations before the parties agree on what is ‘appropriate’ in those particular circumstances.

We strongly encourage SME tenants to seek legal and professional advice to navigate through this somewhat complex process. We are obviously here to help, as required.
 

[1] COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020

The content of this article is current at the date of publication and is intended for reference purposes only. It does not constitute legal advice and should not be relied upon as such. You should always seek legal advice about your specific circumstances before dealing with any of the matters contemplated by this article.

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